The human airways are lined by a highly specialized pseudostratified epithelium, which acts as the first line of defense against inhaled pathogens. This tissue contains both progenitor and differentiated cell types that facilitate mucociliary clearance and epithelial repair in response to injury. Damage to the epithelium may lead to chronic inflammation, remodeling and markedly compromised defense function that are hallmarks of many large airway diseases including cystic fibrosis (CF), chronic obstructive pulmonary disease (COPD), asthma and cancer. Despite decades of research, an adequate clinical solution to these airway diseases remains elusive. The long term goal of the research described in this proposal is to develop a physiologically responsive and clinically applicable tissue-engineered airway from human induced pluripotent stem (iPS) cells. This project will utilize recently published techniques on derivation of pulmonary epithelium from human stem cells to produce a pseudostratified epithelium that can be grown on clinically relevant substrates for use as a surgical tissue graft. Preliminary data presented in this application shows that we have been able to differentiate human iPS cells into p63+/CK5+ expressing airway basal cell-like progenitor cells. We propose to employ additional differentiation procedures to produce a fully differentiated airway epithelium capable of normal ion transport function and regulation by autocrine signaling molecules. To accomplish this goal, the following aims are proposed: Aim 1) Differentiate human iPS cells into airway epithelial progenitor cells that can be used for generating a pseudostratified epithelium on decellularized airway substrates; Aim 2) Characterize the expression and subcellular localization of key ion transport proteins involved in mucociliary clearance and assess the transepithelial transport properties of the differentiated pseudostratified epithelium; Aim 3) Identify key receptor-mediated signaling pathways expressed by differentiated epithelial cells that are known to be essential for normal regulation of ion transport function of the airway epithelium. The results of these studies will provide important insight regarding the development of a clinically applicable tissue- engineered airway graft from human iPS cells. Moreover, successful completion of the aims will have an impact not only on pulmonary tissue-engineering but also on other organ systems where epithelial cell differentiation and transport function are essential for clinical applications.